DBRS Confirms Class A-1 of Wrightwood Capital Real Estate CDO 2005-1

DBRS Limited (DBRS) has today confirmed the rating of the Commercial Mortgage Pass-Through Certificates, Series 2005-C1, Class A-1 (Class A-1) of Wrightwood Capital Real Estate CDO 2005-1 Ltd. and Wrightwood Capital Real Estate CDO 2005-1 LLC (collectively, Wrightwood Capital Real Estate CDO 2005-1) at BBB (low) (sf). The trend is Stable. The initial rating was issued on April 30, 2014, at the request of an investor and coincides with today’s confirmation by DBRS of the Commercial Mortgage Pass-Through Certificates, Series 2005-1, Class A-R (Class A-R), as the classes share the same loss profile within the transaction’s waterfall.

Wrightwood Capital Real Estate CDO 2005-1 is a static cash transaction (reinvestment period ended in August 2010) originally backed by a portfolio of 29 whole loans or a pari passu senior participation of a whole loan. As of the February 2017 quarterly remittance, ten loans remain in the transaction with an aggregate note balance, including preferred shares, of $217.3 million compared with $650 million at issuance. The current undrawn balance of Class A-R is $75.0 million.

According to the February 2017 remittance, 19 loans have successfully repaid from the trust since the DBRS rating was issued. One loan, representing 9.2% of the current pool balance, is scheduled to mature by May 2017 and has been approved for a six-month extension. The largest loan in the pool, Cherry Creek (Prospectus ID#3), which is secured by an office property in Glendale, Colorado, and represents 18.2% of the current pool balance, was previously transferred to special servicing in October 2015 because of maturity default. However, the loan was subsequently returned to the master servicer following a four-year maturity extension to September 2019. As of March 2017, the loan is current ,and the property is 81.1% occupied. There is currently one loan in special servicing, which is highlighted below.

The Casey Portfolio loan (Prospectus ID#1), which represents 16.4% of the current pool balance, is secured by a portfolio of office properties in San Antonio, Texas. The loan transferred to special servicing for maturity default in August 2016. As of April 2017, the loan is currently real-estate owned, as the property underwent foreclosure in January 2017. The borrower’s initial stabilization plan was to market and lease-up the collateral from 60.0% to 90.0% and sell the assets off individually or as a whole. DBRS is currently awaiting information regarding the special servicer’s current resolution strategy for the loan. According to CoStar, the portfolio occupancy rate was reported at 84.0%, with asking rents ranging from $10.00 to $13.50 per square foot (psf) for the individual properties, compared with the Northeast San Antonio submarket for Class B office properties, which reported average vacancy and rental rates of 6.7% and $19.40 psf, respectively. The most recent appraisal dated February 2016, valued the property at $26.1 million, reflecting a 55.8% value decline from the issuance value of $59.0 million. Given the sharp value decline and the loan’s current status, DBRS expects the trust to experience a loss with the resolution of this loan.

The ratings assigned to the Class A-1 and Class A-R certificates materially deviate from the higher ratings implied by the quantitative results. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative results that is a substantial component of a rating methodology. The deviations are warranted given uncertain loan level event risk.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The principal methodologies are North American CMBS Rating Methodology (January 2017) and CMBS North American Surveillance (December 2016), which can be found on dbrs.com under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.